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After much debate, the OPEC + group finally reached an agreement on oil production for next year. Or at least for January.
OPEC + will, as a group, add 500,000 barrels per day in January to its oil production quotas, which currently requires a production cut of 7.7 million bpd. The total production reduction in January will be just 7.2 million bpd.
Future allocated quotas could go up or down, and to determine those oil production levels beyond January, OPEC + ministers will hold additional meetings – one per month.
The deal is billed as a victory for all parties, although behind closed doors all ministers are unlikely to think this way, as some ministers strongly objected ahead of the meeting to adding any production for fear that the demand for oil will not. be able to support any additional production.
In addition to the deal to add 500,000 bpd of production, OPEC + members who are behind in meeting their production quotas will have to make up the difference by March, a delegate said. .
Other things we know:
- Russia’s share of January’s additional 500,000 b / d production is 125,000 b / d.
- Countries can either use their share of the 500,000 bpd increase by increasing production outright, or – for the laggards – they can “use” their share of the additional allocation to offset additional offsetting reductions that they have. must operate.
The fact that the deal only covers the month of January could mean that heavy concessions had to be made to reach consensus. But the January-only deal is being sold as flexibility that will allow the group to respond to fluctuations in demand.
The January deal alone is expected to have a dramatic effect on oil price volatility in the coming months. With new OPEC announcements every month, the market will hang on to every word and oil prices will react in kind, regardless of their actual effect on oil prices.
In a press following the meeting, OPEC President HRH Prince Abdulaziz bin Salman bin Abdulaziz al-Saud berated the media for their “imaginative” star wars they have perpetuated in recent weeks, referring to to reports that the UAE and Saudi Arabia were arguing over the move forward.
By Julianne Geiger for OilUSD
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